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Commodities Briefing 04.Dec 2012

Posted on 04 December 2012 by VRS |  Email |Print

The dawn of a new millennium marked the end of the secular bull market in stocks that had begun almost two decades earlier in the autumn of 1982. The magnitude of the subsequent decline in equity prices forced investors – albeit reluctantly – to accept that returns had been more than excessive during the heady days of the dot.comboom.
The verdict to emerge from investors’ soul-searching was clear – the high valuations afforded to stocks meant they could no longer be depended upon to deliver stellar returns year after year, while the notable increase in correlations among existing classes of risk assets amid the turbulence confirmed that the diversification benefits of traditional asset allocation models had been eroded………………………………………..Full Article: Source

Posted on 04 December 2012 by VRS |  Email |Print

Throughout the fall, as Europe teetered, America’s election created political uncertainty, and global economic growth slowed, the entire commodities complex caught a cold. The DB Commodities Tracking Fund lost nearly 10% as crude oil, industrial metals, food stuffs, and precious metals all moved lower in unison.
Some of this had to do with a mark down in growth expectations and a decline in inflation expectations. A strong but short-lived pop in the U.S. dollar contributed as well. But this is all reversing now as growth reaccelerates (despite the unresolved “fiscal cliff” here at home) and the dollar weakens — setting the stage for what appears to be the start of a strong new uptrend………………………………………..Full Article: Source

Posted on 04 December 2012 by VRS |  Email |Print

Australia’s export commodity prices rose slightly in November but are still well below their mid-2011 peak, Reserve Bank of Australia (RBA) figures show. The RBA’s index of commodity prices in November was 1.7 per cent higher in foreign currency terms compared with October, when it hit a two-year low.
Despite the small bounce in November, the index was still down by 18.3 per cent from its peak in July last year. Even after the downward trend from mid-2011, the index is still up by 191 per cent from where it was in late 2003, before a global economic recovery and China’s rapid industrialisation supercharged demand for minerals………………………………………..Full Article: Source

Posted on 04 December 2012 by VRS |  Email |Print

Though 2012 will go down in the history books as a particularly trying year for U.S. farmers, Rabobank reports that global agricultural commodity markets are expected to shift from a squeeze to a surplus in 2013, but prices will remain volatile.
Rabobank’s annual commodities outlook, titled “Outlook 2013 – Rebalancing on a Tightrope,” analyzes how global macro uncertainty is shaping the markets, specifically the impact of a weak dollar on prices, as well as how speculative money flows will continue to drive trading patterns………………………………………..Full Article: Source

Posted on 04 December 2012 by VRS |  Email |Print

Despite erosion of the cost competitiveness of China’s exports, expectations that China will sell less manufactured goods to Africa have proven misplaced as China’s exports to Africa are likely to have increased to over USD80bn while Sino-African trade is forecast to surpass USD200bn this year, up from USD166bn last year, according to a report co-authored by Standard Bank economists Jeremy Stevens and Simon Freemantle.
China continues to gain market share in Africa. Standard Bank estimates that 18% of Africa’s imports were sourced from China this year so far, up from 16.8% in 2011, 10% in 2008 and as low as 4.5% a decade ago, while Africa’s share of China’s exports is steadily gaining relevance, increasing from 3.3% last year to 5% this year………………………………………..Full Article: Source

Posted on 04 December 2012 by VRS |  Email |Print

Commodity supercycles usually end abruptly, catching almost everybody by surprise. The rhythm is as old as mankind, poignantly described in the life of an Icelandic sheep farmer 100 years ago by Nobel laureate Halldór Laxness.
Studies by the World Bank covering two centuries sketch a pattern of 10-year booms, followed by a slide for the next 20 years or so as excess investment leads to a flood of supply. The long bear market can be cruel for those hanging on to resource stocks, convinced that the rebound is nigh………………………………………..Full Article: Source

Posted on 04 December 2012 by VRS |  Email |Print

The need for a more sustainable global energy system is more urgent than ever, energy watchdog, the International Energy Agency warned on Monday as UN climate talks went into a second week.
“As international climate negotiators enter their second week of talks … in Doha, the need to rapidly transition to a more secure, sustainable global energy system is more urgent than ever,” IEA Executive Director Maria van der Hoeven said in statement………………………………………..Full Article: Source

Posted on 04 December 2012 by VRS |  Email |Print

High oil stockpiles, slowing demand growth and a fragile world economy would give Organisation of the Petroleum Exporting Countries (OPEC) reason to consider supply cuts when it meets next month, Reuters reported at the weekend. But with turmoil in the Middle East keeping the price of oil well into triple digits, OPEC delegates say the 12-member group is expected to stick with an output target of 30 million barrels per day (bpd) agreed a year ago.
They also hope the OPEC will contain tension over sanctions on Iran that have seen Tehran’s output plunge and led Saudi Arabia and Gulf Arab allies Kuwait and the United Arab Emirates to turn up the taps………………………………………..Full Article: Source

Posted on 04 December 2012 by VRS |  Email |Print

Most OPEC ministers and officials say the oil market is balanced, signaling little desire to alter output targets when they meet next month in Vienna. The following table is a compilation of recent comments from officials in the 12 nations of the Organization of Petroleum Exporting Countries, which supplies about 40 percent of the world’s oil.
The group is due to elect a new secretary- general at the Dec. 12 meeting and may renew or change its output ceiling of 30 million barrels a day, which was reaffirmed in June without individual country quotas………………………………………..Full Article: Source

Posted on 04 December 2012 by VRS |  Email |Print

The flurry of coal-to-gas switching among utilities is likely to slow in response to rising gas prices, which will give coal demand a boost next year, according to a new report from the Energy Information Agency.
The EIA projects coal production will rise to accommodate a 6 percent increase in demand from the electric power sector in 2013. This year, low natural gas prices forced coal to the side and plummeted its price………………………………………..Full Article: Source

Posted on 04 December 2012 by VRS |  Email |Print

There is a wide range of ways to get access to gold; for the other precious metals, however, the choice is more limited, with exchange traded products (ETPs) providing the best access. Nicholas Brooks, head of research at ETF Securities, says that only gold, silver, platinum and palladium are actively traded.
Gold has attracted huge investment with platinum, too, enjoying good recent inflows as investors have sought to hedge their exposure to strike-hit platinum producers. For platinum and palladium, there are only physically-backed securities while, for gold and silver, there is a range of futures and other derivatives contracts as well as physically-backed offerings………………………………………..Full Article: Source

Posted on 04 December 2012 by VRS |  Email |Print

If you own a gold fund, you’ve probably heard about the big gains gold bullion has made this year. You may also be wondering why your gold fund hasn’t shared in any of those gains.
The short answer: If you invested in a fund that buys the shares of gold-mining companies — as many do — you probably lost money this year. If you bought shares of a fund that buys the metal itself, you made money. That’s not the normal order of things. Typically, gold miners fare better than the metal itself in a bull market for gold. But these are not typical times………………………………………..Full Article: Source

Posted on 04 December 2012 by VRS |  Email |Print

New York gold guru Jeff Nichols comments, in his latest note for Rosland Capital, that gold continues to disappoint with recent efforts to move higher thwarted by what he, perhaps generously, calls stepped-up speculative selling, coupled with softer physical demand leading to recent bouts of price weakness.
However on the contrary side, the latest sales figures for gold coins from the U.S. Mint suggest that demand from individuals looking to hold physical bullion in the form of gold and silver coins is close to record levels………………………………………..Full Article: Source

Posted on 04 December 2012 by VRS |  Email |Print

Gold analysts at the Certified Gold Exchange are projecting that gold will surpass its all time record high price of $1,920 per ounce in 2013 based on several economic factors that are strengthening gold’s fundamentals.
Gold is positioning itself to break past its all time record high price of $1,920 per ounce in 2013 as several economic factors continue to strengthen the precious metal’s fundamentals. The upcoming fiscal cliff, unstable US Dollar and rising safe-haven demand have caused many investors to shift away from dollar-backed assets in exchange for physical gold throughout 2012………………………………………..Full Article: Source

Posted on 04 December 2012 by VRS |  Email |Print

Gold demand in China may sparkle as an initial batch of 20 banks participated in trading bullion via the Shanghai Gold Exchange’s newly-launched interbank platform. The banks were allowed by the Shanghai bourse, China’s biggest spot gold market, to trade bullion among themselves from Monday.
The transactions involving bilateral price inquiry are performed on the China Foreign Exchange Trade System, and cleared and settled through the gold exchange. The gold bourse charges both parties 0.04 percent of the traded amount, said a statement on its website………………………………………..Full Article: Source

Posted on 04 December 2012 by VRS |  Email |Print

Many goldbugs like gold as a hedge against Federal Reserve policies and high inflation. Paul van Eeden, president of Cranberry Capital, says he does not fear high inflation due to Fed policies. Van Eeden is a different kind of goldbug and in this interview with The Gold Report, he explains how his proprietary monetary measure, “The Actual Money Supply,” is the reason why.
The Gold Report: Paul, your speech at the Hard Assets Conference in San Francisco was titled “Rational Expectations.” You spoke about monitoring the real rate of monetary inflation based on the total money supply………………………………………..Full Article: Source

Posted on 04 December 2012 by VRS |  Email |Print

Precious metals are opportunity buys for long-term investors. My primary thesis is that the endless easy money policies from central banks around the globe have created a long-term tailwind for the various precious metals.
In recent articles I have suggested that gold prices have long-term tailwinds in the form of extensive inflationary pressures and have recommended considering several gold plays, most notably the SPDR Gold Trust (GLD) and the iShares Gold Trust (IAU). I believe all precious metals will benefit from inflationary actions of by central banks worldwide in the coming years………………………………………..Full Article: Source

Posted on 04 December 2012 by VRS |  Email |Print

It’s interesting to note that countries worldwide are scrambling to build new steel mills. It’s been reported that by 2016, approximately 100 new mills will be coming online globally. Some of the countries where mills will be added include Bolivia, Peru, Ecuador and Vietnam.
The governments of these countries, uniformly, see adding steel mills as a way to cut imports, be able to provide steel to their country’s manufacturers and stimulate their industrial development………………………………………..Full Article: Source

Posted on 04 December 2012 by VRS |  Email |Print

“The fundamental demand story for mining and metals remains strong and we are already seeing an increase in growth in the Chinese economy, with expectations that this will be maintained in 2012,” says Ernest & Young’s Global Mining & Metals Leader, Mike Elliott.
“While we remain confident in the outlook for demand, we are more concerned about how the current hiatus in new capital approvals will impact future supply,” he added. “Supply constraints remain the key driver for many commodities in the medium to longer term, particularly iron ore, copper and lead.”……………………………………….Full Article: Source

Posted on 04 December 2012 by VRS |  Email |Print

For investors interested in allocating a portion of their portfolios to commodities, there are a number of ways to do so. You can get exposure to commodities through shares of companies that are involved in the energy, metals, or agriculture space.
That could be done directly by purchasing shares of one company or through an ETF that holds the shares of many companies. Another way to get exposure to commodities is by trading futures. In the case of precious metals, you might even consider purchasing the physical metal as a means of gaining exposure to commodities………………………………………..Full Article: Source

Posted on 04 December 2012 by VRS |  Email |Print

With the wallet-heavy holidays just around the corner, now is a great time for investors to see just where they are spending their money. ETF expense ratios often go unnoticed by investors, assumed to be a necessary cost of playing the game, but many expensive ETFs have a cheaper competitor product.
Whether you hope to find extra income for presents or maybe justify turning the heat up to 80 degrees, if investors are spending too much on ETFs with high expense ratios, they are losing money……………………………………….Full Article: Source

Posted on 04 December 2012 by VRS |  Email |Print

The world’s first ETF to focus on diamonds and gemstones has been launched by New Jersey-based PureFunds on the NYSE Arca. ETF Strategy reports that the PureFunds ISE Diamond/Gemstone ETF (GEMS) made its debut last week as one of three commodity-related exchange-traded funds launched simultaneously by PureFunds, a fresh entrant on the US ETF scene.
Paul Zimnisky, CEO of PureFunds, said that the ETF invests exclusively in companies that produce, refine, sell or hold gemstone inventory, in an effort to overcome traditional impediments to investment in gemstones as assets such as the absence of both spot and futures market………………………………………..Full Article: Source

Posted on 04 December 2012 by VRS |  Email |Print

Jim Rogers takes no prisoners in the way he makes the case for commodities. The author of “Hot Commodities” is so bullish—particularly on agriculture these days—that hearing what he has to say can leave you a bit unsettled.
When IndexUniverse.com Managing Editor Olly Ludwig caught up with Rogers recently, he said new RBS’ lineup of commodity ETNs that have his name on them are so far superior to the competition………………………………………..Full Article: Source

Posted on 04 December 2012 by VRS |  Email |Print

Goldman Sachs Group forecasts a seven per cent return from commodities in the next 12 months, with energy and precious metals leading the way.
The Standard & Poor’s GSCI Enhanced Commodity Index gain will include 10 per cent for energy, 7.5 per cent for industrial metals and eight per cent for precious metals, the bank said………………………………………..Full Article: Source

Posted on 04 December 2012 by VRS |  Email |Print

China could eclipse the United States sooner than many think as the yuan (renminbi) becomes a major player on the word stage that could put the dollar in the shade, analysts said. China’s meteoric rise has propelled it into second place among the world’s biggest economies, leaving only the United States in its wake.
Consumption as a share of gross domestic product is still relatively low in China (35 percent compared to around 70 percent in the U.S. according to the World Bank). But a booming middle class could see the country move away from its export driven economy to a more import and domestically focused market. A market that would need a dominant yuan to allow it to have a trade deficit but remain competitive………………………………………..Full Article: Source

Posted on 04 December 2012 by VRS |  Email |Print

Is the “fiscal cliff” real or just another hoax? The answer is that the fiscal cliff is real, but it is a result, not a cause. The hoax is the way the fiscal cliff is being used. The fiscal cliff is the result of the inability to close the federal budget deficit.
The budget deficit cannot be closed because large numbers of US middle class jobs and the GDP and tax base associated with them have been moved offshore, thus reducing federal revenues. ……………………………………….Full Article: Source

Posted on 04 December 2012 by VRS |  Email |Print

Most conversations around the global economy and fiscal outlook revolve around two key subjects: money printing vs. austerity, and higher taxes/more spending vs. lower taxes/less spending. Both are hot buttons and equally important to global growth.
The consequences of getting policies right/wrong fuels sub-arguments surrounding inflation vs deflation and global growth slowing vs rising population………………………………………..Full Article: Source

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